My Social Security filing epiphany

[akck]

Our decision was based on whether we wanted to leave an inheritance or not. My analysis showed that waiting to take SS at full retirement age would leave at most an inheritance in the low 6 figure or high 5 figure amount. Taking SS at 62 will leave it in the high 6 figure or low 7 figure amount. Based on this, we chose for me to take SS at 62. My wife who will retire this year, will take SS at full retirement age based in my record. She's affected by GPO, so this is the only way to maximize her SS benefit.

 

[Running_Man]

Wouldn't deferring to age 70 give $2760?......as things stand now.

Yes you are correct! That would mean spendable income at age 70 would be $81,775 after tax of $465 $10,000 per year more of spendable income after age 70 not $87,390

 

[samclem]

The "returns" from SS have the important attribute of being almost entirely uncorrelated with stock returns and only weakly correlated with bond returns.

Nobody puts all their retirement money in the "best performing asset class" (e.g. small cap Cambodian stocks, or whatever), they generally take advantage of diversification to maximize risk-adjusted returns (in accordance with their tolerance for year-to-year portfolio variability). So, emotional factors aside, many investors rationally chose to "buy" more of this SS asset class by deferring the start of their SS payments to age 70. Other investors want to try to increase their allocation to stocks and bonds while decreasing their ultimate "allocation" to SS, they do this by taking SS earlier and thereby spending down their portfolio less.

 

[youbet]

Other investors want to try to increase their allocation to stocks and bonds while decreasing their ultimate "allocation" to SS, they do this by taking SS earlier and thereby spending down their portfolio less.

Nicely put. That sure could be one consideration when making the decision along with all the other factors.........

 

[nun]

Seems like self selection of the ages in the chart.
Your chart has a big gap between 83 and 90, I think it would look like a different answer if you picked 84 and 85 as the ages. It seems to me that waiting until 70 would win for total return at 85 and possibly 84.

I just took my 50% life expectancy at 62 (ie 83 years) and 90 as an upper limit, theres a 21% chance that I'll live to 90 if I reach 70.
For single males the break even point for taking SS at 62, 66 or 70 is the mid 80s......what a surprise as that's close to the 50% life expectancy.
Here are some other numbers. I am not investing any of the SS taken, it's just the sum of the checks I'd get with 3% annual inflation.

Starting Age	Starting Amount ($)	Total at 83 ($)	Total at 85	Total at 87	Total at 90
62	15k	458k	516k	578k	678k
66	20k	468k	537k	610k	729k
70	26.4k	451k	532k	618k	757k

 

[nun]

To be clear, deferring SS does not guarantee maximizing "longevity insurance," although it certainly might. You need to know (or assume) what the investment returns on the money received early were and then compare early SS + bucket of investment return dollars vs. deferred SS. And, if using FireCalc for your testing, you need to believe that future investment returns will be no worse than the worst of history for your chosen AA.

I was not considering investment returns, just that you'd get a bigger SS check by deferring which some people might like/need in later life.